Here's your 10-point cheat sheet on the IL&FS crisis:
Finance Minister Arun Jaitley has said the government will take all measures to ensure that adequate liquidity is provided to non-banking financial companies or NBFCs, mutual fund houses, and small and medium enterprises or SMEs, after the stock and bond markets were rattled by the IL&FS crisis.
The ratings downgrade of IL&FS led to significant write-offs in mutual funds, which led to panic among investors as they would like to see their liquidity intact and not get stuck with negative returns.
Debt mutual fund investors and their managers have been caught off guard because the debt securities of IL&FS group enjoyed the top rating A1+ a little over a month ago. But late last month the company was downgraded to D -- that swift development would not have given enough time for investors to work out a safety plan.
Investors are questioning whether debt mutual funds are safe at all now. Debt funds go to a mix of debt or fixed-income securities and they usually have a fixed maturity date and pay a fixed rate of interest, considered to be safe.
But the massive exposure of mutual funds in IL&FS securities and the company's inability to service its debts has rattled people who have invested in those instruments.
An escalation of panic may lead to people withdrawing their investments from fund houses, leading to a destructive ripple effect across sectors.
Of the Rs 90,000 crore debt that IL&FS group is burdened with, Rs 57,000 crore is owed as bank loans, mostly to public sector lenders.
LIC is the largest shareholder with a little over 25.34 per cent stake in IL&FS. Orix Corporation of Japan owns 23.54 per cent. Abu Dhabi Investment Authority holds 12.56 per cent, and Housing Development Finance has 9.02 per cent. Central Bank of India and State Bank of India hold 7.67 per cent and 6.42 per cent, respectively.
The suspended management of the IL&FS cannot represent the company anywhere, the National Company Law Tribunal has said.
The new board, which includes banker Uday Kotak, will meet before October 8 and submit a roadmap before the next hearing of the tribunal on October 31.